Table of contents in this doc
Do I need to include crypto activities on my tax return?
How do I Report Crypto Transactions on a U.S. Tax Return
How should my crypto transactions be taxed?
Do I need to include crypto activities on my tax return?
The IRS has issued guidance on the taxation of crypto activities including earnings, gains, losses, and donations. How these transactions are taxed may vary depending on each individual’s personal tax situation, which is why it is critical for each filer to consider their own situation independently. Please consult with a tax professional for any questions related to your individual tax situation.
You may also refer to the FAQ on Virtual Currency Transactions issued by the IRS for specific information (link: https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions) as well as the IRS Digital Assets page (link: https://www.irs.gov/businesses/small-businesses-self-employed/digital-assets).
How do I Report Crypto Transactions on a U.S. Tax Return
The Form 1040 (U.S. individual income tax return) asks whether at any time during the year the taxpayer received, sold, sent, exchanged, or otherwise acquired any financial interest in any digital asset. This question was specifically designed to identify taxpayers who have engaged in digital asset transactions in the absence of a clear information reporting regime that applies to digital asset exchanges.
In general, U.S. individual taxpayers will file the Form 1040, reporting the income from digital asset transactions on Schedule 1, and capital gains and losses from digital asset transactions on an attached Schedule D. Transactions are itemized on Form 8949 where a taxpayer will list each disposition along with a corresponding tax basis to determine a gain or loss. Gemini transaction statements and gain/loss statements may be used to assist in completing a Form 8949.
How should my crypto transactions be taxed?
Earnings/Income: Crypto assets can be earned on the Gemini exchange by participating in Staking, or through bonuses, contests, or promotions. This generally results in income to the account holder. Please consult with a tax professional for any questions related to your individual tax situation.
Gains or Losses: Gains or losses can result from dispositions of cryptocurrency. In general, this can be calculated by identifying the proceeds from the disposition minus the adjusted cost basis (purchase price plus fees and other costs) of the asset. A disposition occurs when crypto assets are sold for fiat currency, exchanged for other assets (including other crypto assets), or used to purchase goods or services. Gains and losses may be taxed differently for different types of investors, and based on the holding period of the assets disposed of. Refer to IRS Publication 544 (link: https://www.irs.gov/pub/irs-pdf/p544.pdf) for further guidance. Please consult with a tax professional for any questions related to your individual tax situation.